History
Cobalt raised billions to chase deepwater oil in Angola and the Gulf of Mexico, never earned production revenue, and filed for Chapter 11 in December 2017.
2009-2012: Listing and the big equity raises
Cobalt International Energy was a deepwater exploration company with no production and no revenue, so its drilling had to be paid for by outside money. The New York Stock Exchange cleared its shares for trading on 16 December 2009. In April 2011 it sold 31 million new shares at $14 to raise about $434 million for capital expenditures and general corporate purposes. Its shares on issue rose from about 351 million at the end of 2010 to about 388 million a year later.
In December 2011 Cobalt signed the production sharing contract for Block 20 offshore Angola, taking a 40% operated stake alongside Sonangol, BP and China Sonangol. The terms were demanding: four exploration wells, 1,500 square kilometres of seismic survey and at least one commercial discovery within five years, backed by Cobalt's $206 million share of a financial guarantee.
In February 2012 came a $1.5 billion share sale at $28, double the April 2011 price. Only 15.7 million of the 52 million shares were new; the other 36.3 million were sold by the private equity founders.
2012-2014: Borrowing against the future
In December 2012 Cobalt issued $1.38 billion of 2.625% convertible notes due 2019, its first real debt. Convertible notes can be swapped for shares, but otherwise must be repaid. A company funded only by shareholders now had a fixed repayment date.
The founders kept selling. In May 2013 they sold a further 50 million shares, again with no proceeds to Cobalt. In August 2013 Cobalt committed to a new ultra-deepwater drillship, the Rowan Reliance, for three firm years from early 2015 at about $602,000 a day, roughly $660 million of fixed spending. In May 2014 it issued another $1.3 billion of 3.125% convertibles due 2024, leaving roughly $2.7 billion of convertibles against assets that still produced nothing. Shares on issue stayed near 410 million through these years.
2015-2016: The Angola sale fails
In June 2015 Cobalt took a $150 million limited-recourse loan from Société Générale, secured only on the Heidelberg development in the Gulf of Mexico. In August 2015 it agreed to sell both Angolan blocks to Sonangol for $1.75 billion, a deal that would have repaid most of the convertible debt.
Then things unravelled. In June 2016 Cobalt cancelled the Heidelberg loan undrawn, because lenders had made clear the borrowing base would be cut so far the facility was not worth keeping. In August 2016 the Angola sale lapsed automatically on its first anniversary because the Angolan government never approved it. Cobalt had to return Sonangol's $250 million deposit and began marketing its Angolan assets. In September 2016 it paid Rowan roughly $96 million in three instalments to end the drillship contract ten months early, and promised Rowan five years of exclusive drilling work in return for waiving the termination fee.
In December 2016 Cobalt restructured out of court. A group of convertible holders lent $500 million of new first lien secured money and swapped $712 million of convertibles for $585 million of second lien notes plus 30 million shares.
2017-2018: Bankruptcy
In February 2017 the NYSE warned that Cobalt's shares had averaged $0.94, below the $1 minimum. In May 2017 a fourth and final exchange cut total face debt by $339 million since December, and the filing said Cobalt had used up all the room its indentures allowed for more second lien debt. The out-of-court route was closed. In October 2017 the NYSE gave a second warning: the company's market value and its book equity were both below $50 million.
On 14 December 2017 Cobalt filed for Chapter 11 in Houston, the day after the NYSE moved to delist it. The filing accelerated $500 million of first lien notes, $935 million of second lien notes and $1.41 billion of remaining convertibles, about $2.84 billion in all. On 20 December Cobalt agreed with Sonangol to transfer the Angolan blocks for $500 million, paid in two instalments through mid-2018, subject to court approval. The receivables arbitration would end, but the sale-agreement arbitration was only extended. That was less than a third of the $1.75 billion agreed in 2015.
In January 2018 the exchange filed to remove a class of Cobalt's securities from listing, and in March 2018 Cobalt terminated the registration of a class of securities, ending its reporting obligation for them. As of its latest beat, Cobalt was in bankruptcy, its Angolan assets were being sold and it had never earned material production revenue.
Written from the 21 story beats below (2009 to 5 Mar 2018), which come from the company's own announcements and filings.